Not cashing in on cashing out: An analysis of low cash‐out refinance rates

Mallick Hossain, Igor Livshits and Collin Wardius

Real Estate Economics, 2026, vol. 54, issue 3, 727-760

Abstract: Lowering a borrower's interest rate is one of the most effective ways to reduce a borrower's debt burden. Mortgage refinancing offers a chance to shift debt balances from high‐interest loans into a low‐interest mortgage through “cashing out” some of the home's equity. Using anonymized data on mortgage refinancing behavior, we find that over half of borrowers with high‐interest loans and available home equity do not take advantage of their cash‐out opportunities. While the cash‐out “surcharge” can rationalize this pattern, we leverage a policy change at Fannie Mae that eliminated this surcharge for student‐loan borrowers and find that the presence of a student loan does not significantly affect borrowers' propensity to cash out.

Date: 2026
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https://doi.org/10.1111/1540-6229.70031

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Working Paper: Not Cashing In on Cashing Out: An Analysis of Low Cash-Out Refinance Rates (2026)
Working Paper: Not Cashing In on Cashing Out: An Analysis of Low Cash-Out Refinance Rates (2023)
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